Ericsson Stock Set For Dry Month After 5% Rise Last Week?

by Trefis Team
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Ericsson stock (NASDAQ: ERIC) has gained almost 5% in the past week and currently trades at $12 per share. Additionally, Ericsson, a multinational networking and telecommunication giant, has seen its stock lose 12% over the last six months, dropping from around $14. The company reported Q2 2021 earnings in July this year, where revenue came in at $6.37 billion, down marginally from $6.46 billion for the same period last year. However, gross margins jumped from 37.6% in Q2 2020 to 43.4% in Q2 2021, with EBIT margins rising from 6.9% to 10.6% over this period, driven by the company’s successful cost-cutting initiatives.

However, after the recent rally, will ERIC stock continue its upward trajectory over the coming weeks, or is a correction in the stock more likely? According to the Trefis Machine Learning Engine, which identifies trends in the company’s stock price using ten years of historical data, returns for ERIC stock average -0.9% (implying the stock will largely remain level around $12) in the next one-month (twenty-one trading days) period after experiencing a 4.5% rise over the previous week (five trading days).

But how would these numbers change if you are interested in holding Ericsson stock for a shorter or a longer time period? You can test the answer and many other combinations on the Trefis Machine Learning Engine to test Ericsson stock price forecast after a rise or fall. You can test the chance of recovery over different time intervals of a quarter, month, or even just 1 day.

MACHINE LEARNING ENGINE – try it yourself:

If Ericsson stock moved by -5% over five trading days, THEN over the next twenty-one trading days Ericsson stock moves an average of 1.7%, with an average 59.3% probability of a positive return over this period.

Also, given a -5% movement for the stock over five trading days, it has historically witnessed an excess return of 0.8% compared to the S&P500 over the next 21 trading days, with a weak 46.9% probability of a positive excess return.

Some Fun Scenarios, FAQs & Making Sense of Ericsson Stock Movements:

Question 1: Is the price forecast for Ericsson stock higher after a drop?

Answer: Consider two situations,

Case 1: Ericsson stock drops by 5% or more in a week

Case 2: Ericsson stock rises by 5% or more in a week

Is the average return for Ericsson stock higher over the subsequent month after Case 1 or Case 2?

Ericsson stock fares better after Case 1, with an expected return of 2.1% over the next month (21 trading days) under Case 1 (where the stock has just suffered a 5% loss over the previous week), versus, an expected return of -0.8% for Case 2. This implies a price forecast of $12.35 in Case 1 and a figure of $12.00 in Case 2 using Ericsson market price of $12.10 on 10/14/2021.

In comparison, the S&P 500 has an expected return of 3.1% over the next 21 trading days under Case 1, and an average return of just 0.5% for Case 2 as detailed in our dashboard that details the expected return for the S&P 500 after a fall or rise.

Try the Trefis machine learning engine above to see for yourself how Ericsson stock is likely to behave after any specific gain or loss over a period.

Question 2: Does patience pay?

Answer: If you buy and hold Ericsson stock, the expectation is over time the near-term fluctuations will cancel out, and the long-term positive trend will favor you – at least if the company is otherwise strong.

Overall, according to data and Trefis machine learning engine’s calculations, patience absolutely pays for most stocks!

For Ericsson stock, the returns over the next N days after a -5% change over the last five trading days is detailed in the table below, along with the returns for the S&P500:

You can try the engine to see what this table looks like for Ericsson after a larger loss over the last week, month, or quarter.

Question 3: What about the stock price forecast after a rise if you wait for a while?

Answer:  The expected return after a rise is understandably lower than after a drop as detailed in the previous question. Interestingly, though, if a stock has gained over the last few days, you would do better to avoid short-term bets for most stocks.

It’s pretty powerful to test the trend for yourself for Ericsson stock by changing the inputs in the charts above.

What if you’re looking for a more balanced portfolio instead? Here’s a high-quality portfolio that’s beaten the market consistently since 2016.

Invest with Trefis Market-Beating Portfolios
See all Trefis Price Estimates
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